CLASS ACTIONS - CVS CAREMARK CORP. V. LAURIELLO
CVS Caremark Corp. v. Lauriello, [Ms. 1120010, Sept. 12, 2014] __ So. 3d __ (Ala. 2014). The Supreme Court affirms a class certification of a fraud class action. This action alleges fraud in the 1999 settlement of a 1998 class action where the defendants represented that only $56 million in insurance was available for the securities fraud class action that alleged $3 billion in damages. After that settlement, it came to light that there was an excess policy with allegedly unlimited coverage. The circuit court certified the same class (minus those who opted out) to pursue this fraud action. The principal issue in the appeal from the class certification was whether common issues would predominate in this action alleging fraudulent misrepresentation about and suppression of the existence of the excess policy that induced class counsel to settle the earlier action. As against arguments that reliance issues predominate in fraud class actions, the Court analyzed earlier Alabama cases and cases from other jurisdictions holding that fraud class actions may be certified depending on the particular fact questions. For example, the Court approved, as a test for "whether proof of reliance involves predominating individual issues of fact," "whether there was a material variation in the representations made or in the kinds or degrees of reliance by the persons to whom they were addressed." The Court noted that here the representation induced counsel to accept a reduced settlement offer on behalf of the entire class and that therefore individual reliance was irrelevant, the class as a whole was defrauded. Incidentally, the Court spoke highly of plaintiff's expert, William Rubenstein, the current editor of Newburg On Class Actions, "an authority on which this Court has often relied."
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